Investigating the impact of strategic private sector intervention on the sustainability of emerging poultry farmers

Abstract

Broadly stated, emerging or small-scale egg farmers have to overcome constraints when attempting to be competitive in a free market economy. Government support is often lacking. Consequently, the implementation of sustainable business practices, within the value chain, intended to facilitate greater market access or participation, is a moot point. It is within the context of economic sustainability that the private sector, as a corporate social responsibility initiative, could add value to the endeavours of the emerging poultry farmer. Based on an exploratory case study, the objectives of economic sustainability and a strategic private sector intervention were investigated. This investigation was conducted in three phases: The first phase, in the form of a literature review, researched the future role of small-scale farmers across the world. Through the literature review it was established that this role, particularly in developing countries, was to provide food security and sustainability. With the proliferation of globalisation and market liberalisation, small-scale farmers face insurmountable competition from larger commercialised competitors, who have a greater degree of coordination to supply buyer-driven value chains. Therefore, the economic sustainability of small-scale farmers is largely dependent upon their ability to establish synergies within the value chain which would provide them with the commercialised competencies required to be active participants in formal sectors of the market. The reality is that this would require a degree of vertical and horizontal integration. These forms of integration are capital intensive and require extensive market intelligence. To mitigate these limitations, the formation of a strategic alliance, driven by a private sector stakeholder, was proposed. As a result of the literature review, the key success factors for successful market participation were established and the consequential transaction costs expounded upon. The findings of the literature review were used as a basis for an industry analysis, which was performed in phase two of the investigation. The industry analysis, conducted as phase two of the investigation, involved the application of analytical tools to industry data. Information was collated from current industry reports and statistics. These analytical tools were used to determine the industry attractiveness and the strategic interventions required, in order to achieve a comparable advantage for the emerging farmer. If the industry is not conducive to economic sustainability, then any further investigations would be futile. Overall, the industry analysis determined that future growth potential was positive and that profitability was largely dependent upon the volatility of input prices, such as feed, and the ability of small-scale farmers to gain access to more lucrative market segments located in higher-income yielding areas. This would in all likelihood only be possible if backward linkages were established by small-scale farmers. The favoured strategic option proposed, entailed the formation of a strategic alliance between a producer organisation and a feed mill company. Feed mills have the capital and competencies to develop strategic linkages between various actors in the current value chain. Phase three is an empirical study of a small-scale egg farm. Results and findings from phase one and two of the study were used as benchmarks, in order to determine the competitive strength of this emerging farmer. As a result of an on-farm investigation and manager interview, it was found that the manager identified the same constraints as those expounded on in the literature review. By drawing up an income statement for the farm, the researcher was able to further investigate the effects of various strategic interventions on revenue streams and cost structures. Whilst the ‘critical farm size' was a limiting factor for an efficient strategic intervention by a feed miller, it was also found that such an intervention would have cost reduction benefits. Overall, a strategic intervention would increase profitability and ensure long term sustainability.